Industry Committee on June 7th, 2023

[Mark Schaan]

We would understand the current definition to be sufficiently broad and wide to encompass a whole host of behaviours, including those that are influenced by government, and I would note, from our annual report, that we review those with frequency.

[Ed Fast, Conservative, Abbotsford, BC]

Just for clarity, you're suggesting that every single Chinese company would be covered under the current legislation.

[Mark Schaan]

I can say that in the last year for which statistics were published, the investment review division contemplated 1,200 foreign investments into the country.

[Ed Fast, Conservative, Abbotsford, BC]

How many of them are non-state-owned enterprises from China?

[Mark Schaan]

I wouldn't have those specifics. I would simply say that the rationale for the high number is a function of the fact that the definition is broad, including for the purposes for national security reviews.

[Ed Fast, Conservative, Abbotsford, BC]

By the way, I'm not trying to be difficult. We're trying to get to the bottom of this legislation. This is a once-in-a-decade opportunity for us to review the ICA, get it right and reorient it to clearly reflect Canadian values and principles. That's what our amendments are focused on.

They're not focused on being unreasonable, but we know that Canada is vulnerable when it comes to foreign direct investment in our country. If we don't get it right, we're going to lose our sovereignty. We're selling out our national security if we don't get it right. We have this opportunity to get it right. I'm encouraging my colleagues here to take these amendments seriously.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Fast. I appreciate your comments.

I think it's important to keep in mind that the officials are here with us as experts on this specific bill. They're not lawmakers, so they're not here to debate the rationale. They're here to explain the bill as proposed before this committee. Are there any other questions or comments on CPC-1?

Shall amendment CPC‑1 carry?

I think we'll have to have a recorded vote.

(Amendment negatived: nays 7, yeas 4 [See Minutes of Proceedings])

[The Chair, Liberal, Joël Lightbound]

Amendment CPC‑1 is negatived, which brings us to clause 2.

Shell clause 2 carry?

(Clauses 2 to 6 inclusive agreed to)

[The Chair, Liberal, Joël Lightbound]

This brings us to clause 7, where there are amendments. There is G-1, and I recognize Mr. Fillmore.

[Andy Fillmore, Liberal, Halifax, NS]

Thanks, Chair.

I will preface my comment by saying that we all want public policy that provides clarity and does not introduce ambiguity. This is simply a technical amendment that I think will help to achieve objectives that we all share around the table here for clarity and for the effectiveness of the bill.

It removes some confusion about which types of deals would be subject to section 15. We know they are the kinds of deals covered in paragraphs 11(a) and 11(b) that are subject to section 15, but as currently written they could be contested by an investor. We want to clarify that section 15 does clearly apply to paragraphs 11(a) and 11(b).

With that, I would invite Mr. Schaan to shed a little more light on that.

[Mark Schaan]

Thank you, Mr. Chair.

The proposed amendment to section 15 specifies that the investments that are subject to the new pre-implementation filing requirements that are described in clause 2(1) shall not be reviewable for the purposes of section 15, but section 15 will continue to apply to transactions referred to in paragraphs 11(a) and 11(b) of the unamended act.

The amendment is made so that section 15, which allows the review of investments related to cultural businesses, would not inadvertently capture investments subject to review under the new pre-implementation filing requirement.

It's a technical mechanism, because there could have been confusion where a transaction would have seen them fit under two different parts of section 11, leading to an argument that their transaction was exempt from section 15, based on the original wording, which was not the intent.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Schann.

Mr. Vis.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

This is just a technical question. I'm sorry. I am looking for paragraph 11(1)(c) in the original act. Can you please read that? On what page of the act is it?

[Mark Schaan]

The amendment introduces and adds proposed paragraph 11(c). What this does is it essentially clarifies the relationship between section 15 and section 11, because paragraphs 11(a) and 11(b) already exist.

[The Chair, Liberal, Joël Lightbound]

Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I haven't had a lot of time to spend on the government amendments. I'm busy with fires and all of that. Just so that I'm clear on this, anybody who is basically trying to buy a Canadian cultural business is subject to automatic review. Is that correct?

[Mark Schaan]

It is at the minister's discretion, but yes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Bill C-34 provides some sort of confusion to that or—

[Mark Schaan]

There is a pre-filing requirement that's introduced. This rewording will, instead of carving out what section 15 does not apply to in section 11, specifying clearly what section 15 does apply to in section 11—namely, paragraphs 11(a) and 11(b). It will be made clear that investment that qualifies as requiring notification under 11(b) must notify under that provision even if there's a theoretical overlap with the requirements of the new proposed paragraph 11(c).

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

That's on the pre-filing that's required before the transaction—

[Mark Schaan]

Exactly.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Okay, thank you.

[The Chair, Liberal, Joël Lightbound]

Are there any questions or comments on amendment G‑1?

Shall amendment G‑1 carry?

(Amendment agreed to [See Minutes of Proceedings])

[The Chair, Liberal, Joël Lightbound]

That brings us to amendment CPC‑2.

I would just like to say that, if this one carries, amendment NDP‑1 cannot be moved because they are identical. That goes without saying.

Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

This amendment amends section 15(1) by adding a couple of things. Bill C-34 already does 15(1). We add a couple of a new sections towards the end of the clause. We add a section subsection 15(2) that says:

(2) Despite the limits set out in subsections 14(3), 14.1(1) and (1.1) and 14.11(1) and (2), an investment is reviewable under this Part if

(a) the non-Canadian making the investment is a state-owned enterprise or is controlled by a state-owned enterprise;

(b) the Governor in Council, on the recommendation of the Minister, is of the opinion that [the] review of the investment is in the public interest; and

(c) [that] the Governor in Council issues an order for the review within 21 days after the day on which the non-Canadian gives notice of the investment to the Director.

Bill C-34, in its current form, and the Investment Canada Act provide for essentially, in my understanding, two independent review regimes when a transaction comes forward: the national security review and the net benefit review.

The current threshold trigger of the net benefit review for a state-owned enterprise is a formula, as I understand it.

Mr. Schaan, at the previous meeting I think you said it's $512 million this year. In such cases where the investments are at least equal to that amount, the state-owned enterprise must file an application for a net benefit review, and the potential transaction must be approved by the Minister of Industry. That's my understanding if it's correct. If the Minister of Industry chooses—and it's a choice—the investment can also be sent for a national security review, if within the threshold, after the consultation with the public safety minister. That's my understanding of the way it works now.

The rationale for this amendment is that, in the current form, neither the Investment Canada Act nor Bill C-34 require an automatic filing for a net benefit review of a state-owned enterprise investment if it is below that formula—this year being a $512 million asset value... I think the threshold is on asset value. As a consequence of this, any state-owned enterprise investment made below the $512-million figure will not be subject to a net benefit review.

The proposed amendment seeks to exempt all state-owned enterprises from the threshold limit, regardless of the value of the investment, thereby ensuring that all state-owned enterprise investments will be required to file an application for a net benefit review.

This amendment was drafted based on the feedback received from our members after they expressed the need for a lower review threshold for state-owned enterprises to zero and to ensure greater security of any state-owned enterprise investments. It actually comes, as well, from the industry committee report, which was passed unanimously by this committee, on the review of the Investment Canada Act from a couple of years ago. I think it was actually recommendation one in that report that said this should go to zero.

Experience tells us that, in my province for example—and I think I may have mentioned this when officials were before us—state-owned enterprises, particularly from non-democratic countries, are buying a lot of Canadian assets below that and are getting control of industries. In my case, in the fishery industry, they have been acquiring a lot of the buyers of seafood in Nova Scotia and have been paying three, four or five times the value of the company in order to get access to, and control of, the supply chain of the product.

We know—I've had people contact me since we started to raise this issue in this committee on this bill—that in the Prairies, for example, on mineral rights filings and ownership there, state-owned enterprises and business entities from China have filed and have obtained a lot of mineral rights over land in the Prairies.

We also know from my western colleagues that we are seeing farmland being acquired in the prairies in particular.

All of these types of examples—just a few of these types of examples—are well below the formula limits, and we're being taken advantage of, in my view, for our kindness and generosity and our adherence to world orders when we're seeing companies and entities that do not operate on a fair and open market sort of profit motive. For example, if you look at Hytera.... Not to belabour Hytera, but Hytera rarely makes any money. That's the reason why their companies can win government procurement contracts by underbidding companies in Canada that have to be profitable. They buy them and pay four or five times, as they are in my province, for those businesses—which makes no actual business sense, because you can't get a return in any reasonable time—for purposes other than business.

That's all you can conclude when a company that has public documents like Hytera consistently loses money and continues to win these bids. The purpose of that business has to be something other than what we like to think is an open, fair and competitive market that allows fair and open competition to produce the best value for those who buy the products, based on the great joys of our capital system. That's not happening, because they're taking advantage of these high thresholds.

I think for that reason.... I wasn't part of the study, Mr. Chair, that happened and that was referred to here and was done I think over two Parliaments. I think at the last election it was picked up again, because at the front of the report it shows two different committee structures of members and two different chairs. They produced that report unanimously—I think Mr. Masse was part of that—and unanimously asked for this to go to zero.

I was surprised when BillC-34 was tabled to not see that. The committee recommendation was not included in what I think what was a genuine attempt to not only speed up the system but to give the minister more ability and flexibility to deal with some of these issues that I'm talking about, but it's still a too rigid thing in the sense that the formula on the threshold in our mind, and in this committee's mind at the time, is way too high, and that the only way to ensure that this doesn't happen is to not pick another formula that says, well, $220 million is the formula now for this year, or $100 million, because they will start acquiring businesses under that, and they will continue to do that, which they are doing in my province, well below that. I don't think you would ever say that the formula is $10 million.

I think the only way to get at this—and what is the purpose of the amendment here—is to implement what this industry committee said unanimously in its report, which is that the threshold should be zero. As officials, can you tell me why you think the current formula is more useful—this bill doesn't propose to change the current formula—to prevent what's happening below that number, that somehow that will happen anyway? I think the bill is a formula for the status quo to continue in this area.